There is no denying it: the not-for-profit landscape has changed – and will continue to change. Growth has always been essential. Now, resilience is paramount. Ongoing fiscal and operational viability require strategic responses to intensified government oversight, shifting donor priorities, sophisticated cybercrime and emerging technology. In celebration of those that exist to serve the greater good, our specialists tackle the most pressing concerns facing nonprofit organizations today.
Our first article examines the pillars of nonprofit resilience: cash flow management, revenue diversification, regulatory compliance and donor stewardship. We then turn to the human side of sustainability – how to optimize executive succession, staff retention and governance – before exploring how artificial intelligence and cybersecurity are reshaping financial reporting, forecasting and donor management.
Our second article focuses on proposed changes to Form 990. No longer simply a tax filing, it is becoming a public reflection of organizational leadership, integrity and trust. Nonprofits that embrace this shift will be better positioned for increased regulatory scrutiny while strengthening stakeholder confidence and long-term sustainability.
In our third article, our specialists present solutions that help foundations protect their assets, reputation and mission through stronger defenses against fraud and operational risk. The key is to integrate governance, cybersecurity, AI oversight and fraud prevention into a cohesive risk management framework.
Our sector specialists’ insights reflect our 135-year commitment to organizations that put purpose before profit, to which we are grateful.
Featured Article
Top Concerns for Today’s NFP Organizations
By Mark J. Piszko, CPA, CGMA, Partner
Many not-for-profit organizations today face increasing hurdles to attain successful and sustained operational growth. Based on several recent surveys of a large demographic of not-for-profit organizations, the majority of respondents indicated that their near-term organizational goal is less about continual growth and more about resilience. Recent national and international events, increased government oversight, changing donor giving patterns and an ever-expanding use of technology, all contribute to NFPs’ concerns about staying fiscally and operationally viable.
Among their greatest concerns are maintaining strong executive leadership, retaining financial stability and consistently meeting ongoing demands for their services, particularly for health and human services organizations.
Past and Present
Not long-ago leadership and boards of NFPs contemplated questions such as:
How do we grow our organization?
How do we expand our programs?
These questions have now been superseded with:
Do we have adequate cash reserves?
Are we too reliant on one funder?
What would happen If we lost our major funder?
What operational and data security risks are emerging?
Do we have a succession plan in place for executive positions?
Are we using technology and artificial intelligence (AI) to improve operational efficiencies?
Are we properly managing internal control and cybersecurity risk?
Do we have a plan in place to sustain the level of our program services over the next five years?
Financial Viability
Financial forecasting and cash flow analysis and management are critical to the ongoing fiscal viability of an organization. This obviously includes stringent cost controls and revenue diversification to maintain cash inflows. For continued financial resilience, the questions boards should be asking include:
Which programs generate surplus unrestricted cash?
Which programs rely on the most internal subsidies to break even?
Is our indirect rate sufficient to cover administrative costs?
The board’s concern should focus on continued future sustainability rather than historical financial outcomes. Do they fully understand key performance indicators as well as operating margins?
Government-funded organizations will be especially challenged because of funding changes, particularly at the federal level. The uncovering of massive fraud committed by certain not-for-profit organizations has led to closer and greater government scrutiny of the types and amounts of grants awarded. Additional accountability and government oversight is already planned. Increased regulatory compliance should be top of mind for these NFPs.
Fundraising is becoming more challenging as well, as donors want more information about impacts made by the not-for-profit organization recipients. They expect their donations to be used for mission-related purposes and want to know outcomes supported by their donations. Expectations have risen while the number of donors in certain cases has decreased. Boards should be aware of their organization’s largest donors to nurture existing relationships and to work on securing additional future donations. Many organizations rely heavily on major gifts, making significant donor relationship-building even more important.
Executive and Staff Retainage
Successful organizations have strong leadership and effective board oversight. Does your organization have a formal plan for executive team succession? Executive succession planning is important, but so is staff retention and preventing employee burnout. Cross training of staff is a good way to leverage existing employees to perform multiple functions. When necessary, does your organization perform executive and staff recruiting that brings the best talent to the organization? Competition for top talent is greater now than ever, so stakes are high in talent acquisition.
Use of Technology
The increasing prevalence of AI cannot be overlooked. NFPs should adapt and use it as part of their internal processes. Current AI technology can be used to automate accounting processes, provide reporting and analysis, budgeting and forecasting assistance and improved donor and grant management processes. Human oversight is still necessary with the use of AI to ensure accuracy and reliance. And it is important to remember that the myriad use of AI should be used to enhance employee productivity, not replace it.
As part of their AI adoption plan, organizations must invest in training for employees to gain the most benefit from its use. Organizations increasing AI usage should ensure they have strong cybersecurity controls and adequate cybersecurity insurance coverage against potential data breaches.
Operational Changes
Some NFPs will consider operational or structural changes for future viability. The boards of these organizations may consider mergers or collaborations with similar organizations, refinement of their program offerings, right-sizing of their operating structure, or even changes to board composition to ensure the governing body is composed of leaders best suited for the organization’s mission and viability.
We Can Help
The Not-for-Profit team at PKF O’Connor Davies can assist your organization with traditional auditing and tax services, as well as advisory services such as review and assessment of internal controls, evaluation of financial systems and reporting structures, budget preparation, recommendations to strengthen financial operations, cybersecurity, compliance and strategic guidance to support future growth.
To share this article or contact the author directly, view it on our website here.
Form 990 Reimagined: What the IRS Transparency Push Means for Nonprofits
By Eva Mruk, CPA, EA, Partner and Garrett M. Higgins, CPA, Partner
The U.S. Department of the Treasury and the IRS recently announced plans to strengthen oversight of tax-exempt organizations through revisions to Form 990. It is anticipated that revisions will extend far beyond tax reporting. The changes signal regulators’ expectation that nonprofit organizations demonstrate stronger governance, enhanced transparency and greater accountability in how they manage resources and fulfill their missions.
Form 990 Is Evolving Beyond Year-End Compliance
For decades, Form 990 has served as the foundation of nonprofit reporting, providing financial and operational information to regulators, donors and the public. Traditionally, many organizations approached filing as a year-end compliance exercise managed primarily by finance departments or external tax preparers. Today, however, Form 990 is evolving into something far more significant. Regulators, grantmakers, watchdog organizations, journalists and donors increasingly rely on the filing to evaluate organizational integrity, governance practices and operational effectiveness.
Key Areas of IRS Focus for Tax-Exempt Organizations
The IRS has indicated that future revisions may place additional emphasis on areas perceived as higher risk, including government grants, government contracts and fiscal sponsorship arrangements. These focus areas reflect growing concerns surrounding oversight of taxpayer-supported funds, governance of sponsored activities and the increasing complexity of nonprofit operating structures.
Fiscal sponsorship arrangements, in particular, are expected to receive heightened scrutiny. These structures have become increasingly common as organizations seek efficient ways to launch charitable initiatives and expand mission-driven programs without creating separate legal entities. While fiscal sponsorship can provide operational flexibility and encourage innovation, it also creates governance and compliance challenges that require careful oversight. Regulators appear increasingly focused on whether sponsoring organizations maintain sufficient accountability, financial oversight and documentation over sponsored projects and restricted funds.
Organizations receiving substantial government funding should also anticipate increased scrutiny surrounding grant reporting, documentation procedures and internal controls. Federal agencies and regulators continue to emphasize transparency regarding how public funds are allocated, monitored and safeguarded. Nonprofits lacking centralized grant management systems or clearly documented oversight procedures may face increased regulatory and reputational risk as reporting expectations continue to evolve. Given the extensive information reported on Form 990 and regulators’ increasing ability to leverage technology and analyze filings electronically, gaps in governance policies and inconsistent disclosures may become easier to identify.
Form 990 is evolving beyond tax compliance. Learn what increased IRS focus on governance and transparency could mean for nonprofits.
Private Foundations: Strengthening Fraud Prevention and Risk Governance in an AI-Enabled Environment
By Anan Samara, EA, Partner, Joan McCarthy, Supervisor and Sarah F. Vindigni, CPA, Supervisor
Private foundations operate in an environment where fraud schemes are becoming increasingly sophisticated, driven by advances in technology, cybercrime and artificial intelligence (AI). As stewards of charitable assets, foundations must protect their financial resources while maintaining the trust of donors, grantees, regulators and the public.
Effective fraud prevention requires more than a single control or policy. It requires a comprehensive framework that combines strong governance, active oversight, sound internal controls and ongoing vigilance. As discussed in our recent bulletin, AI Governance: What Foundations Need to Know, boards and management are increasingly expected to understand and oversee emerging risks associated with technology, cybersecurity and AI. Fraud prevention is now part of that broader governance responsibility.
The following considerations can help foundations strengthen their defenses and reduce exposure to fraud and operational risk.
Governance and Oversight
Strong governance is the foundation of an effective fraud prevention program. Foundations should maintain a diverse board of directors or trustees that includes individuals with expertise in finance, accounting, legal, nonprofit operations, risk management and technology oversight. Establishing an audit or finance committee can provide dedicated oversight of financial reporting, internal controls, compliance matters and emerging risks.
As discussed in our May 2026 bulletin regarding AI governance, boards are increasingly expected to understand how emerging technologies may impact organizational risk, compliance, operations and fiduciary responsibilities. While trustees are not expected to be technology experts, they should actively oversee how technologies such as AI are being used within the foundation and whether appropriate safeguards have been established.
Fraud prevention, cybersecurity and AI governance are becoming increasingly interconnected. Effective oversight requires leadership to ask important governance questions, including:
Do we have sufficient internal controls to prevent and detect fraud?
How are emerging technologies, including AI, being used within the organization?
Are responsibilities for financial oversight, technology governance and risk management clearly defined?
Have we established policies and procedures to address cybersecurity, payment authorization and data protection risks?
Are management and employees receiving appropriate training and guidance?
Board and committee meeting minutes should carefully document significant discussions, decisions and approvals. Effective oversight also requires active engagement throughout the year — not solely during scheduled meetings — to ensure emerging risks and control concerns are identified and addressed promptly.
Segregation of Duties
Segregation of duties remains one of the most effective safeguards against fraud. Key responsibilities – including authorization, recordkeeping, custody of assets and reconciliation – should be assigned to different individuals whenever possible. Separating these functions reduces the likelihood that a single individual can initiate and conceal an unauthorized transaction.
Additional controls that can strengthen oversight include:
Dual approval requirements for significant disbursements
Independent review and approval of journal entries
Monthly bank and investment account reconciliations
Clearly documented expense reimbursement and corporate credit card policies
Regular monitoring and review of financial transactions
For smaller foundations with limited personnel, complete segregation may not always be feasible. In these situations, compensating controls such as increased board oversight, independent reviews and periodic monitoring of transactions can help mitigate risk.
AI-generated communications, voice cloning and sophisticated phishing are creating new fraud risks for private foundations. Read how foundations can strengthen payment verification, cybersecurity and vendor oversight.
Explore More Insights on the New Tax Law
The One Big Beautiful Bill Act (OBBBA) adds another layer of complexity to an already evolving business and financial landscape. Its provisions continue to shape tax planning, compliance obligations and long-term decisions for not-for-profit organizations, businesses and individuals. Explore our dedicated resource hub for practical insights designed to help you understand the changes, assess their potential impact and plan your next steps with greater confidence.
Connect with Us
If you have any questions, contact your PKF O’Connor Davies client service team or contact us here. Visit our website to request a proposal.
For personalized content tailored to your interests, subscribe to our emails here. You’ll receive industry insights and updates directly in your inbox.
If you are interested in joining PKF O’Connor Davies, explore opportunities on our Careers page.
Follow us on social media! Connect with us on LinkedIn, X, Instagram and Facebook to stay informed and engaged.
